Cash budget: Quarter April May June Total Beginning cash balance $ 74,000 $ 50,0
ID: 2579369 • Letter: C
Question
Cash budget: Quarter April May June Total Beginning cash balance $ 74,000 $ 50,000 $ 50,000 $ 174,000 Add cash receipts: Cash collections from sales 436,000 695,000 865,000 1,996,000 Total cash available $ 510,000 $ 745,000 $ 915,000 $ 2,170,000 Less cash disbursements: Purchases of inventory 258,000 318,000 244,000 820,000 Sales commissions 26,000 40,000 20,000 86,000 Advertising 200,000 200,000 200,000 600,000 Rent 18,000 18,000 18,000 54,000 Salaries 106,000 106,000 106,000 318,000 Utlities 7,000 7,000 7,000 21,000 Equipment 16,000 40,000 56,000 Dividends Paid 15,000 15,000 Total disbursements $ 630,000 $ 705,000 $ 635,000 $ 1,970,000 Cash excess (deficiency) $ (120,000) $ 40,000 $ 280,000 $ 200,000 Financing: Borrowing 170,000 10,000 - 180,000 Repayment (principal) (180,000) (180,000) Interest payment (5,300) (5,300) Total financing 170,000 10,000 (185,300) (5,300) Ending cash balance $ 50,000 $ 50,000 $ 94,700 $ 194,700 Need Help in the below Section: 12 Percent Anual Interest Rate Calculations for June financing section: Cash available for repayment 230000 Interest on quarterly borrowing -6900 Interest payment (all or nothing) -6900 Remaining cash available for principal repayment 236900 Remaining cash available rounded down 236900 Total borrowing for April and May 170,000 10,000 Total borrowing for April and May rounded down 170,000 10,000 Principal repayment -180000 Cash budget: Quarter April May June Total Beginning cash balance $ 74,000 $ 50,000 $ 50,000 $ 174,000 Add cash receipts: Cash collections from sales 436,000 695,000 865,000 1,996,000 Total cash available $ 510,000 $ 745,000 $ 915,000 $ 2,170,000 Less cash disbursements: Purchases of inventory 258,000 318,000 244,000 820,000 Sales commissions 26,000 40,000 20,000 86,000 Advertising 200,000 200,000 200,000 600,000 Rent 18,000 18,000 18,000 54,000 Salaries 106,000 106,000 106,000 318,000 Utlities 7,000 7,000 7,000 21,000 Equipment 16,000 40,000 56,000 Dividends Paid 15,000 15,000 Total disbursements $ 630,000 $ 705,000 $ 635,000 $ 1,970,000 Cash excess (deficiency) $ (120,000) $ 40,000 $ 280,000 $ 200,000 Financing: Borrowing 170,000 10,000 - 180,000 Repayment (principal) (180,000) (180,000) Interest payment (5,300) (5,300) Total financing 170,000 10,000 (185,300) (5,300) Ending cash balance $ 50,000 $ 50,000 $ 94,700 $ 194,700 Need Help in the below Section: 12 Percent Anual Interest Rate Calculations for June financing section: Cash available for repayment 230000 Interest on quarterly borrowing -6900 Interest payment (all or nothing) -6900 Remaining cash available for principal repayment 236900 Remaining cash available rounded down 236900 Total borrowing for April and May 170,000 10,000 Total borrowing for April and May rounded down 170,000 10,000 Principal repayment -180000Explanation / Answer
Answer
Interest rate = 12% (annual), which means 1% per month
Loan taken---
$170000 in April, repaid in June end, hence went outstanding for 3 months (April, May and June)
$10000 in May, repaid in June end, hence went outstanding for 2 months (May and June)
Interest due
Loan Taken
April
May
June
Total Interest [April + May + June]
A
170000
[170000 x 1%] 1700
[170000 x 1%] 1700
[170000 x 1%] 1700
5100
B
10000
0
[10000 x 1%] 100
[10000 x 1%] 100
200
Total A+B
180000
1700
1800
1800
5300
Month
June
Cash excess/(deficiency)
[given in solution you provided] 280000
Financing:
Borrowing
0
Repayment possible
[Full borrowing of $180000 can be repaid as enough cash balance exists] -180000
Interest paid
[ still enough balance to pay total interest due] -5300
Total Financing
-185300
Ending Cash balance
94700
Interest due
Loan Taken
April
May
June
Total Interest [April + May + June]
A
170000
[170000 x 1%] 1700
[170000 x 1%] 1700
[170000 x 1%] 1700
5100
B
10000
0
[10000 x 1%] 100
[10000 x 1%] 100
200
Total A+B
180000
1700
1800
1800
5300
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